Supply Chain Management Process Improvement Service Line Energy Initiative -Americas-

1. DRAFT Supply Chain ManagementProcess Improvement Service LineEnergy Initiative-Americas- FY’99 Draft Business Plan October 31, 1998

2. Contents Energy SCM Service Line FY’99 Draft Business Plan Page 3 4 5 6 7 8 9 10 11 14 17 19 22 24 25 26 • Mission Statement • Alignment to PwC MCS Model • Objectives • Definitions • Offering • Competition • Energy SCM Team • Business Plan Framework • Develop • Sell • Deliver • Manage • Critical Success Factors and Risksh • Economics • Investments • Scorecard

3. Mission Statement What is our goal? Energy FY 99 Mission Statement • Our SCM capability is committed to providing innovative solutions across the PwC prism (operations strategy, process improvement, and supply chain technology support) that assist our clients in achieving breakthrough performance across the supply chain. Our passion for results delivery and integrated, frame breaking solutions will establish our reputation as the business advisor of choice in the market. • The North American Theater’s MCS Energy Initiative will focus the delivery of the firm’s services (strategic change, process improvement & technology solutions), software alliances and breakthrough thoughtware on solving complex business problems for energy companies. • We will ensure quality of our services, growth of our practice and profitability for the firm. • We will become the dominant market leader within Petroleum Upstream, Petroleum Downstream, Chemical, Regulated Utilities, and emerging integrated Energy and Power Marketing companies. • We will provide a technically and professional challenging and rewarding environment within our staff can grow and be successful. Energy SCM Mission Statement

4. Alignment to Firm Strategy How does the SCM service line map to the Prism? SECTORS Utilities Supply Chain Management Energy Marketing Strategic Change Chemicals Downstream Upstream Process Improvement Technology Solutions SERVICE AREAS SCM services are actually an integration or bundling of services viewed across the Prism, in the shaded industry sectors above. Integrated SCM solution will focus on changing a company’s operational strategy, current business processes (e.g. demand planning), and support applications, by implementing new advanced scheduling software (APS) tools - leveraging our credentials in other industries.

5. How will the Energy SCM service line contribute to the success of the PwC Energy Initiative? Objectives • We hope to: • contribute $4 million in revenues to the Americas Energy Practice in FY ‘99 • develop the practice on a global basis • increase market awareness of PwC’s SCM capabilities • “re-package” the talents of many PwC consultants with deep industry supply skills • work the wedge by receiving sell-on opportunities from other service lines, including ABS • leverage our industry client base to introduce other capabilities (FVP, merger integrator, etc.

6. Definitions What is SCM and what is the underlying point of view that frames the value proposition? SCM Definition SCM is an integrated approach to achieving the next level of improvement in return and customer response with an optimized approach to manufacturing, transportation and supply across ther entire supply and distribution network - in ways that create sustainable improvements in total performance. SCM Energy Point of View • Energy industry has historically competed at a supply chain level, since products have limited differentiation, prices are volatile and service and supply reliability is very important. • A paradigm shift is underway… from historic linear programming tools which tend to optimize silos, to non-linear optimization thinking across the full breadth of the value chain. • The convergence of the availability of new, sophisticated, cots-effective tools and reliable data from ERP systems makes the time ripe for SCM investment by our clients. Note: Full Value Procurement is a separate service area and not included in the SCM practice area

7. SCM Offering What are the key service offerings we can take to the market? SCM Offering SCM represents a bundling of related services that individually and collectively focus on improved performance including: • Diagnostic and Assessment Opportunities • Full Value Procurement (FVP) • SCM Driven Operations Strategy • Process Redesign (Demand Planning, Operations and Maintenance, Scheduling, Manufacturing/Generation, Supply) • Technology Implementation (APS Tools: i2, Manugistics & Logility) • Electronic Commerce • Data Warehousing • Performance Measurement & Management • Organization Design This array of services, when combined, can be seen as “Insights to Implementation” since it is integration which provides the greatest measurable result

8. The Competition Many service providers are moving into this service area - how will we compete ? • The competitors are: • The big 4 - primarily AC, CSC and EY (AC has made huge investments in SCM across all industries and was recently victorious at Mobil) • Strategy and Operational consultancies (ATK, McKinsey, Booz). Are not provided integrated services - non IT and IT. • Industry boutiques - LP vendors, Vector, Petrosoft, Insight • Why are we different : • Extensive global network and citations in other (more complex) industries • Deep industry skills from supply (STARS) engagements • Relationships with APS vendors - helping them define industry strategies • Ability to deliver process, change management and IT solutions

9. Energy SCM will operate with a core team of dedicated resources augmented by extended resources from either the Energy practice or national SCM service line. Energy SCM Team • Charles Kafoglis • Peter McCullagh • Dennis Byrd • Jim Byron • Marty Stetzer • Paul Feder • Dan Celta • Service Line Lead: Charles Kafoglis Core Team Extended Energy Team Other Key SCM Contacts • Downstream • Mark Fischer • Rony Jammar • Ron Brennan • Russell Pell (UK) • Susan Hulse (UK) • Geoff Haerle • Lynn Sievers Chemicals • Bob Bohnsak • Jim Pfeiffer • Neil McCormack (UK) • Alex Beever - SCM Champ • Jay Gleishman - MW APS • Jeff Johnson - East APS • Paul Galvin - Chem UK • Steve Shepherdson - Canada • Wes Clavey - APS Compaq • Scott Mclean - APS Canada

10. The business plan has been developed around the key elements of a successful consulting practice . Framework • What is our distinctive point of view? • How will we create value for our clients? Develop Delivering Value to Clients Sell Manage • How will we develop and maintain a robust book of business ? • How will we aggressively penetrate the marketplace ? • How will we manage resources in support of service line success and growth ? Deliver • How will we consistently exceed client’s expectations ? • How will we improve or delivery capabilities over time?

11. Develop What is our distinctive point of view? How will we create value for our clients? Objective Develop The Energy SCM service line will be anchored by a distinctive point of view and supported by powerful delivery capabilities. Development activities will focus on investing in thought leadership, building market awareness,building valuable relationships with APS vendors, developing prototype solutions through firm and client investments as breaking new ground with framebreaking solutions, such as OilMonitor.. Delivering to Clients Sell Manage Deliver Defining Characteristics • Ideas and points of view are consistently referenced in target trade publications • Our prototypes are innovative and demonstrate new think for our clients and prospects • Value proposition is developed and clearly defined - its articulation is clear and prior work validates its definition • Core methodologies are documented, reuseable and unique - they are consistent with vendor offerings • Focus on client’s current and emerging issues is relentless • Competitive environment is clearly understood and monitored • Thought leadership is an ongoing priority investment • Knowledge and experience are dynamically shared amongst a global team and with clients Challenges for Energy SCM • Ability to change our clients paradigm • Continuity of thought leadership - regular and frequent • Demonstratability of our prototypes • Ability to manage multiple vendor relationships • Ability to keep up with heavily invested competitors (e.g. AC) • Robust diagnostic methodologies and tools to accelerate delivery • Understanding emerging developments in the supply chain field • Maintain communications with an overly complex PwC SCM world • Must unite our refinery/plant services with our core SCM capabilities

12. Develop Develop Delivering to Clients Action Plan Sell Manage Deliver Actions Point of View • Conduct literature search to identify and review all articles and publications in the energy supply chain field over the past three years. • Create and issue a survey to referenced clients of PWC and competitors to assess approach to SCM, satisfaction with outcome, and potential business needs - consider teaming with vendor to complete survey • Participate in the Midwest SCM weekly APS calls • Stay plugged into E-business and energy evolution • Participate in SCM National thought leadership activities • Fully define energy Point of Views • For Downstream - Beyond Refining Gate is umbrella but need value proposition • For Chemicals - define and document • For Utilities - define and document Service Line Documents & Methodologies • Review, consolidate and refine the PW and C&L collateral materials, methodologies and tools - refine the SCM diagnostic to work for each • Document the multiple points of market entry for SCM and communicate as appropriate (data warehouse, FVP, E-Bus, refinery services) • Develop a SCM best practices package. • Collect and document all know SCM Energy citations

13. Develop Develop Delivering to Clients Action Plan Sell Manage Deliver Actions Competitive Environment • Identify alliance partners and review fit for each market segment • Manage each alliance with documented rules of engagement • Focus Sales Manager as interface point with each alliance partner Publications and Conferences • Identify all relevant conferences and events and assign accountability for active participation (i2, Logility, CLM are recent examples) • Identify speaking opportunities • Publish white paper for each point of view • Energy Practice Industry Segment Coordination • Schedule meetings with segment leaders (Kafoglis, Dickinson, McCullagh) to review plan and identify points of coordination

14. How we will build and maintain a robust book of business? How will we aggressively penetrate the market? Sell Objective Develop The Energy SCM team will generate $?? million in bookings in FY ‘99. In order to meet this stretch revenue target, disciplined management of the sales funnel will be essential. Sales activities will focus on positioning the service offerings in the marketplace, responding quickly to qualified opportunities,being initiatlly dependent on the APS vendors, aligning SCM with complementary PwC offerings, developing proposals, pursuing target clients and conducting internal/external marketing. Delivering to Clients Sell Manage Deliver Defining Characteristics • Selling is based on key executive relationships at EVP and VP levels • Presentations are grounded in a validated understanding of the client’s issues • Exploit our ability to educate our clients • Our best SCM - industry knowledgeable resources are deployed at our most important targets • A high level of internal communications about our SCM capability is maintained across the practice • Initially we will be more open and flexible in the types of companies we will target or respond to, as a means of building citations • Strict adherence to rules of engagement with APS vendors • Exploit PwC/PointCast Utility Insider Challenges for Energy SCM • Becoming a member of every client’s consideration set for SCM services • Increasing market awareness of our service offering • Improving quality of our proposal documents • Developing a verifiable value proposition • Ability to make the most of our limited resources and quickly be able to ramp up other industry knowledgeable resources into SCM to fill engagement needs • Being able to offer value based pricing • Managing project risks • Successfully deploying MCS sales manager

15. Develop Sell Delivering to Clients Action Plan Sell Manage Deliver Actions Client Pursuit • Maintain all leads in SAM • Identify target clients by industry segment and classify as A, B, C • Establish target account responsibility within the Energy SCM team. • Develop a de-brief format for wins/losses to capture learnings. • Support global requests for support on ad hoc basis Internal Marketing • Participate in GRMP / Lamp sessions. • Prepare and deliver an overview of SCM at the next MW and East Energy Management meeting. External Marketing • Speak at industry conferences. • Actively participate at APS vendor conferences and user meetings • Investigate viability of co-sponsoring a conference. • Develop targeted promotional materials by industry segment.

16. Develop Sell Preliminary target client list Delivering to Clients Sell Manage Deliver Energy SCM Sales Funnel Utilities • Illinova • Nipsco • 1st Energy • Pacificorp • Duke • Puget • NFG Downstream • Citgo • Valero • Chevron • Canada • Sun • IOL • P/Canada • Sun M/America • Mobil • CENEX • Nynas • Shell Europe Chemicals • BP(UK) • Lyondell • SASOL • Hanna Opportunity Identified Approach Defined Koch - STARS PDVSA - STARS Pennzoil - SAP Tosco - Audit ARCO - Audit Proposal Submitted Win

17. How will we consistently exceed our client’s expectations? How will we improve our delivery capabilities over time? Deliver Objective Develop The longer term success of Energy SCM will be driven most powerfully by a successful and referenceable track record of exceeding client expectation. Delivery activities will focus on building a passion for delivery excellence, demonstrating relentless client focus, staffing/managing engagements and earning citations. Delivering to Clients Sell Manage Deliver Defining Characteristics • Superior quality of service is received and expectations exceeded on every engagement. • Relationship with alliance vendor is enhanced on each engagement. • Bold, frame breaking solutions are conceptualized and delivered. • Lessons learned and other constructive feedback are captured on each engagement. • Client credibility is earned and repeat business is won. • Project risk is effectively managed • Project economics (realization , utilization) meets targets. Challenges for Energy SCM • Meeting realization targets given startup mode of services • Securing post diagnostic phase work thru strong benefits case • Learning from each project • Managing risk of working with alliance partners/vendors • Building relationships at the executive level • Broadening and deepening our delivery capabilities • Solving the most complex and challenging issues • Leveraging our prototypes

18. Develop Deliver Delivering to Clients Action Plan Sell Manage Deliver Actions Project Delivery • Deploy key team members in a project management capacity. • Emphasize delivery over selling as a priority. • Assign level IV staff as full time project managers, if possible. • Conduct quality reviews on active engagements. • Build the delivery capability of the SCM team. • Promote discipline and consistency of delivery excellence through re-use of tools/techniques from previous engagements • Develop standard letter agreement and terms of reference • Develop standard project plan • Develop citation request letter • Investigate potential use of risk/reward sharing agreements • Celebrate, reward and communicate excellence across the practice

19. Manage How will we manage the service line in support of success and growth expectations? Develop Objective Delivering to Clients Effectively managing a practice on this scale will place a premium on effective leadership and resource management. SCM leadership must assume accountability for execution against the business plan which includes recruiting, assimilating, deploying, developing and retaining staff who can provide thought leadership, augment our delivery capabilities and expand the book of business. Sell Manage Deliver Defining Characteristics • A strong sense of community, purpose and direction surrounds the team. • Strong peer relationships are in place. • Professional and personal opportunities to grow are balanced against project demands. • Keen understanding of synergies of related services - refining, FVP, ERP, etc • High retention and satisfaction of practitioners provides continuity. • Effective on-boarding and rapid deployment of new hires provides traction quickly. • Rigorous business plan management and accountability drives growth and success. Challenges for Energy SCM • Hiring resources who can hit the ground running • Training resources in industry specific tenets of SCM • Maintaining and leveraging PwC global network of Energy SCM staff • Retaining key people • Levering SCM national investments (oriented to CIP) while staying focused on the Energy market

20. Develop Manage Action Plan Delivering to Clients Sell Manage Deliver Actions Team Management • Schedule a recurring quarterly team meetings to review progress against plan and discuss service line priorities - first meeting in November. • Develop and communicate team norms of conduct. • Participate in SCM national practitioner meetings as scheduled Staff Development • Establish clear performance expectation with identified SCM core team players. • Carry out skills assessment and set-up training days. • Develop basic and later advanced level training courses • Align skill development and training activities with client delivery needs. Recruiting • Inventory current delivery capabilities and skill/knowledge/experience gaps. • Develop profiles of target hires and a recruiting approach. • Recruit additional experienced consultants to augment our current skill mix. • Develop cases for experienced hire recruiting. • Review hiring targets with Kafoglis • Develop on-boarding plan, checklist, materials, buddies.

21. Develop Manage Action Plan Delivering to Clients Sell Manage Deliver Actions Knowledge Management • Establish knowledge sharing protocols and expectations. • Identify best repository for critical information. Marketing • Identify most effective means of reaching target clients. • Develop tools and schedule to reach target clients (audit, ERP direct mail, industry association, conferences, benchmarking, direct contacts, alumni network). • Develop marketing scorecard.

22. CSF’s and Risks What are the factors most vital to achieving Energy SCM objectives ? Manage Critical Success Factors Risks • Quickly building delivery capabilities • Establishing a valuable citation • Getting leads from APS vendors • Securing internal support and investment by the industry group • Selection and management of alliance partners (i2 vs Manugistics vs Logility) • Clients expect proven value proposition - need to invest • Without investment staff will migrate to other client opportunities

23. Economics Utilization and realization by staff. Energy SCM Economics Highlights • $5 million revenue target • 17,000 chargeable hours • 75% average realization target Assumptions • 6 new hires on board by Dec

24. Economics Revenues and key staff by project. FY99 Energy SCM Economics

25. What investments are required to launch the service line and drive projected revenues for the next three years? Economics Energy SCM Investment FY ‘99 Energy SCM Projected Revenues DOLLARS (MM) YEAR

26. Scorecard What does success look like? How will we know when we get there? Measure Metric Target Actual (YTD) $ Bookings Average % Utilized Average % of Full Fees # of White Papers # of Conference Presentations # of References in Journals # of Proposals Issued # of Sold Engagements Client Satisfaction Rating % of Projects Earning Citations Staff Retention Rate # of New Hires Staff Survey Feedback Rating $5MM 65% (incl. FWAC) 55% 6 4 2 16 5 Exceeds Expectations 100% 90% 18 Exceeds Expectations 400k 2 4 0 4 2 1 Economics Develop Sell Deliver Manage